Jersey Oil & Gas has agreed to farm-out a 50% interest in the Greater Buchan Area (GBA) licences in the UK Central North Sea to NEO Energy, a full-cycle North Sea operator in the UK Continental Shelf.

According to the North Sea-focused upstream oil and gas company, it will receive material value including cash payments and financing through the field development plan approval.

The company will also receive a minimum of 12.5% of the Buchan field development costs to first oil.

Jersey Oil & Gas will receive a carry for its share of the estimated $25m cost to carry out the Buchan field through to field development plan approval.

Upon the completion of the transaction, the oil and gas company will receive a $2m cash payment.

Besides, NEO Energy will pay a $9.4m cash payment upon finalisation of the Greater Buchan Area development solution and a $12.5m cash payment on approval of the Buchan development plan by the North Sea Transition Authority (NSTA).

Furthermore, Jersey Oil & Gas will receive a $5m cash payment on each development plan approval by the NSTA in respect of the J2 and Verbier oil discoveries.

NEO Energy will have the option to raise its 50% stake in the Buchan licence by up to an additional 37.5% in exchange for additional cash payment.

Jersey Oil & Gas CEO Andrew Benitz said: “We are delighted to announce this transaction with NEO Energy, a well-funded industry heavyweight and the fifth largest producer in the UKCS.

“The farm-out marks a major value creation moment for JOG, a significant de-risking of the GBA development programme, from both an operational and funding perspective, and provides the springboard from which to grow the long-term value of the business.

“We are looking forward to working collaboratively with NEO Energy to select the optimal development solution for the GBA and taking the project through to sanction and on into future production.”

The transaction is subject to the receipt of approvals from the NSTA for the transaction and the associated extension of the Jersey Oil & Gas’ two Greater Buchan Area licences.